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Better Activity But Still Cautious

Discussion in 'Forex Daily News & Outlook' started by mercaforex, Sep 24, 2009.

  1. mercaforex

    mercaforex New Member

    Jul 1, 2009
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    By Mercaforex

    The USD finished the day off on a stronger foot against both the EUR and the GBP as the Federal Reserve was able to stir the market. The progress the greenback made yesterday may only turn out to be a one day affair, but it nevertheless pointed out that risks remain in the marketplace and that investors remain a fragile bunch. The FOMC Statement pointed to better economic activity but within the same paragraph highlighted that consumer spending and the high rate of unemployment are detrimental and may continue to hold back progress in the economy. The U.S. equity markets traded lower yesterday, not in a panic stricken mode, but did show signs of nervousness. The question that is being raised by some, is what type of earnings the corporate front is going to be able to produce mid-term? Share prices this summer may have been helped more by optimistic sentiment than pure fundamentals.
    The USD will continue to face risk events today as the U.S. releases its weekly Unemployment Claims and Existing Home Sales. Unemployment is a critical issue for the U.S. and has a direct impact on the public’s confidence and the number is expected to be slightly worse today compared to last week’s result. The Home Sales figures are forecasted to see a light improvement, but these results are not anticipated to cause jubilation. Tomorrow New Home Sales will be released adding to the information investors can digest. The G-20 meetings will get underway in Pittsburgh officially today and will serve as a platform for politicians and international officials to express their ideas on ‘helping’ the global economy. A cynic could point out that these conferences produce a lot of talk and little action. The USD even though it did trade positively against the EUR and GBP yesterday remains at the weaker part of its trading range against most currencies. Traders may choose to watch equity markets today in order to gauge their risk appetite.


    The EUR had an interesting day of trading as it marched to new highs early on but fell during the later stages of the day. The EUR was unfazed by a rather large amount of PMI data from the continent yesterday that came in largely more negative than anticipated, particularly from Germany. The German Ifo Business Climate data will be released today and is expecting a reading of 92.1, which would be an improvement upon last month’s outcome. While it may have declined on Wednesday, the EUR does remain at the higher part of its range against the USD. Tomorrow will be a relatively light day of publications for Europe and investors will be looking ahead to this weekend’s upcoming election in Germany and its results. The question is whether or not Angela Merkel’s ‘grand coalition’ will be re-elected. Germany is the major economic force on the continent and the outcome of the election will stir sentiment.


    The Bank of England released its MPC Meeting Minutes results on Wednesday with little overall effect on the Sterling. The GBP basically traded within range on the day as investors were essentially given news that they expected. The MPC made no changes to monetary policy and will continue to deliver on its stated quantitative easing measures. There will be little in the way of hard economic data from the U.K. today and tomorrow will be a rather lackluster regarding numbers too. The Sterling has had a wide trading range for the past week and provided traders with volatility. Going into today’s session the GBP continues to find itself on a rather precarious edge and appears ready for a strong move.


    The JPY mustered additional strength against the USD yesterday. The fact that the Chinese equity markets have been trading in a rather violent manner the past month has probably added fuel to the stronger move in the JPY as Asian investors look for safer avenues. Gold continued to trade within a fairly tight range and has found a wide array of opinions regarding its pricing, the debate essentially is one of speculation versus inflation. Volumes in the Asian marketplace should begin to increase today as traders make their way back to their desks after celebrating holidays.

    FOMC Creates Dollar Excitement, But Is It Enough?


    What was interesting about yesterday’s trading is the strong push up to 1080.2 just before we collapsed 20 points in the last hour and a half of trading. If you notice the US Dollar swooned down at 14:15 EDT yesterday. The next 15 minute candle was the beginning of a 70 pip move up! As the dollar began to flex its muscles the American equity market decided to it was time to give back some gains. What followed was a 20 point move on the downside as traders decided they couldn’t eat anymore dishes filled with risk. (I apologize at the weak play on words. I am talking about risk appetite) we will watch the markets closely over the next few days. We are still in an uptrend and while the urge to start selling is strong, do so with great caution, as dollar strength may be a one trick pony. Support 1061.2, 1058.5, 1056.9, 1051.9, 1035 Resistance 1066.1, 1073.8, 1080.2, 1097.6, 1133.5, 1209.1


    There are a few points to discuss in yesterday’s trading. While the dollar got stronger, Gold became weaker. And when the dollar became weaker, Gold showed strength. Now this is not abnormal in any way. However, Gold basically ranged back and forth about $12 with each ebb and sway of the dollar. The swings were large and were enough to cause a shake in the gold market. Currently we are trading lower, and not showing much strength. At this point, it looks like the XAU/USD is poised to push lower. We must hold support of 1005.2. Support is 1005.2, 995.40, 984.6, 971.75, 961.72, 941.32, 937.6 Resistance 1011.85, 1019.65, 1024.


    The Sterling is trading weaker against the dollar at the moment. As we push lower notice that we have not made higher highs in the past few days. Even though we are trading within a trading channel the downtrend line is intact. Keep a close eye on this currency pair as we test support. Support 1.6140, 1.6113, 1.5982, 1.5800 Resistance 1.6337, 1.6375, 1.6467, 1.6586, 1.6658, 1.6664


    The current market relationships are still holding. As long as the Greenback continues to weaken, the Euro, Gold etc will get stronger. At the moment we are seeing some dollar weakness, and according to the charts, what might be a continuation of the down move. This will allow for the Euro to continue its push up to levels we haven’t seen since 2008. Support 1.4708, 1.4646, 1.4610, 1.4560, 1.4515, 1.4449 Resistance 1.4766, 1.4844, 1.4866, 1.4967, 1.5083

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